2016 (2) TMI 977 - AT - Service Tax

Tribunal allows Cenvat credit on key services, denies on construction post 2011

Commr. of C. Ex., Delhi-III Versus Capsugel Healthcare Ltd.

Commr. of C. Ex., Delhi-III Versus Capsugel Healthcare Ltd. - 2016 (44) S.T.R. 101 (Tri. - Chan.) Issues:1. Denial of Cenvat credit on various services under Rule 2(l) of the Cenvat Credit Rules, 2004.2. Challenge to the order regarding denial of Cenvat credit on rent-a-cab service and general insurance service.3. Challenge to the order denying Cenvat credit on renting of immovable property service.4. Availment of Cenvat credit on construction services post 1-4-2011.Analysis:1. The assessee availed input service credit on multiple services during the period of 1-4-2007 to 30-12-2011. A show cause notice was issued to deny Cenvat credit on certain services based on Rule 2(l) of the Cenvat Credit Rules, 2004. The Adjudicating Authority allowed credit on some services, which was further upheld by the Ld. Commissioner (A). However, the Revenue challenged the order regarding rent-a-cab service and general insurance service, while the assessee challenged the denial of credit on renting of immovable property service and construction services.2. The Revenue contended that the assessee was not entitled to Cenvat credit on general insurance service and rent-a-cab services due to lack of nexus with manufacturing activities. The Tribunal found that general insurance services were for the benefit of employees working in the factory, justifying the credit. Rent-a-cab services were used for transporting employees to and from the factory, deemed as input services based on a precedent from the Hon'ble High Court of Bombay. Consequently, the appeal by the Revenue was dismissed.3. Regarding the challenge by the assessee on denial of Cenvat credit for renting of immovable property service, the Tribunal noted that the appellant had another unit on rent, making the rent paid and service tax eligible for credit as it was integral to the manufacturing business. Thus, the denial of credit on renting of immovable property service was set aside.4. The Tribunal addressed the issue of availing Cenvat credit on construction services post 1-4-2011 when it was excluded from the definition under Rule 2(l) of the Cenvat Credit Rules, 2004. Credit post this date was denied, but for the period before 1-4-2011, the assessee was deemed eligible for the credit as it was utilized in the manufacturing business. The matter was remanded to the adjudicating authority for quantification of input services credit to be denied post 1-4-2011, thereby disposing of the appeal filed by the assessee.